2010 Mobile Industry Predictions Survey. © Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 2

2010 Mobile Industry Predictions Survey

© Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 2 http://www.chetansharma.com Mobile Industry Predictions 2010 First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2010. Thanks to all who participated in our 2010 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way. Before we dive into the survey results, let’s do a quick wrap-up of the year that was. Well, since we just completed one heck of a mobile decade, let’s do a quick jog down the memory lane. The Last Decade: 2000-2009 Each new decade brings its own consumer and technology trends. During the 2000s mobile cemented its place in the global society fabric, the use of mobility became addictive and pervasive, to be without mobile seemed a curse and innovation blossomed and took user expectations to new heights. From a pure statistical point of view, the global mobile subscription penetration grew from 12% in 2000 to approximately 68% in 2009 - phenomenal by any measure. The overall revenues grew over 400%, the data revenue grew 32,600% and the total subscriptions grew 563%. NTT DoCoMo paved the way with the imode launch in 1999 and they were the operator to emulate throughout the last decade, leading every single year in data revenues, in new application and service revenue sources, and in innovation and risk taking. They tried to export the success to other regions with little reward but DoCoMo clearly led the industry in taking mobile devices where they have never gone before. China and India were late to the party but during the second half of the decade caught up with the western world and eventually surpassed all nations becoming number one and two nations by subscriptions respectively. In 2006, China Mobile became the most valuable operator passing Vodafone. Mobile devices went significant transformation as well. From the early Bluetooth, camera, and music phones to the iPhones, the Storms, and the Androids, the industry was transformed by the introduction of Apple’s iPhone in 2007. While Bluetooth, sleek designs, camera phone defined the first half of the decade, the second half was all about the applications and the mobile web. While Nokia dominated the entire decade in terms of the sales and profits, having missed the touch revolution, it leaves the decade a bit battered and a bit behind playing catch-up to the newcomers who profoundly disturbed the status quo. Razr carried Motorola through 2006 when its global share peaked but was left to reinvent itself during the second half. It seems to have redeemed itself with the successful launch of Droid and upcoming Android devices. While many in the industry predicted RIM’s demise, the company has only gotten stronger and is looking good for the 2010s. The emergence of Samsung and LG as strong players in the mobile ecosystem was also a big story of the decade with Samsung increasing its share by 380% and LG by 575% becoming the number 2 and 3 players respectively. While Microsoft’s Windows Mobile had an early start and the enterprise market share, it lost its way through several missteps and is on dialysis as we enter the new decade. One shouldn’t count WM out though but there is a lot of work to be done before it can capture the imagination of the ecosystem which has been sequestered away by iPhone and Android. While many new application areas were introduced during 2000s, none was able to displace SMS as the leading app category by usage and revenues. However, it’s relative share has started to come down especially in North America and Western Europe. As data usage grew, so did the data traffic bringing many data networks to their knees. We expect the data traffic consumption to only accelerate. Many people are underestimating the growth rates (as they did previously) and the strain the increase in consumption will put on the unprepared networks. Projector phones will take media consumption to a new level. Data management is going to be big business in the 2010s. Overall, the mobile industry became a trillion dollar industry in 2008 and the data revenues are increasing in almost all regions. Voice is being commoditized at fast pace and that has put the traditional economics and ecosystem wealth distribution in topsy-turvy.

© Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 3 http://www.chetansharma.com Mobile Industry Predictions 2010 The US market also experienced tremendous growth with mobile data service revenues climbing 21,327% and becoming a mainstay in the mobile economy. In 2008 it crossed Japan as the most valuable mobile data market. US was late in adopting SMS but caught fire once American Idol started using it and even played a good role in the 2008 Presidential election in showcasing the power of mobile. Verizon started the decade being the number one operator and after trading places with Cingular and ATT grabbed the title back in 2009 (after the Alltel acquisition) to become the most dominant carrier in North America. Many smaller players competed by being innovative with Cincinnati Bell launching the fist UMA device, Sprint the first mobile eReader, and TMO launched the hotspot business which has now become an essential component of an operator strategy going forward. Mobile is also replacing landline at a much faster pace than expected and within the first half of the new decade, we will have majority of the users using mobile vs. landline. Just like the last decade, this one starts with a new standard deployment of LTE that will keep operators and vendors busy throughout the decade. However, a lot of the developing markets will still be deploying 3G during the first half of the decade. Infrastructure providers suffered the most in the decade bookended by the two recessions. Consolidation of giants (Alcatel Lucent, Nokia Siemens), bankruptcies of the famous (Nortel), and uprising of the upstarts (Huawei) pretty much defined the decade for the segment. Ericsson and Huawei enter the new decade from a strong position and looking to dominate the global markets. The last decade was also marked by some prominent IP battles such as RIM vs. NTP, Qualcomm vs. Broadcom, Sony Ericsson vs. Samsung, Upaid vs. Satyam etc. (disclaimer: we worked on some of these cases and testified as an expert)

© Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 4 http://www.chetansharma.com Mobile Industry Predictions 2010 Here is our “subjective” list of movers and shakers of the last decade 2000-20092010-2019 Operator of the Decade NTT DoCoMo DCM led the way in almost all new category of apps and services. Its data service revenue was highest in each of the last 10 years DCM will continue to lead along with KDDI and SKT. However, it might be the carriers with tremendous scale who will have the calling cards in the new decade. Watch for China Mobile, Vodafone/Verizon, Telefonica, Orange, Bharti, Unicom, Singtel OEM of the Decade Nokia Nokia dominated in sales and revenues in each of the 10 years and while the last couple of years took some shine off its glorious past, the company nevertheless came out ahead RIM, Apple, Nokia, Samsung Smartphone OEM of the Decade Apple Smartphones as we know them were introduced by RIM but Apple defined the category and the subsequent ecosystem This space will be very competitive with Apple still the gold standard to beat Infrastructure Provider of the Decade Ericsson Its prime rivals struggled to stay afloat while Ericsson grabbed most of the revenues from infrastructure contracts and is very well positioned for the next decade Ericsson is joined by Huawei as the two top infrastructure provider with Huawei giving tough competition for LTE contracts. ZTE and other Chinese infrastructure providers will also replace some of the incumbents Nation that led in mobile data Japan This is a no brainer. Japan led with Korea a close second. Finland, UK also impressed US, China, and India are well positioned to make an impression but most likely during the second half. Japan will still be a major player Device of the decadeiPhone followed by Razr iPhone impressed with form and function while Razr with its global sales making it a top selling device of all times The field might get more crowded as all OEMs focusing on the smartphone category. However, OEMs who also focus on the 90% of the market w/o smartphones might win the top prize

© Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 5 http://www.chetansharma.com Mobile Industry Predictions 2010 The year 2009 Apple continued to dominate the headlines for the third straight year - whether it was the launch of 3GS or the upcoming introduction of the fabled tablet. Google too kept the ecosystem active. It has executed on its mobile strategy with brilliant acumen though causing significant consternation amongst its partners who it needs to be successful. It has been often misunderstood by competitors, regulators, and partners. Often, they have focused on Google’s tactics vs. its strategy. Look for these two players to be very aggressive as they try to fight for the mantle and the mindshare. While Nokia leads the OEM space by a good distance, its momentum in the smartphone space left a lot of question marks. Motorola made a credible comeback with Cliq and Droid. Samsung and LG continued to innovate and expanded on their share of shipments and revenues. India outpaced China in net-adds and crossed 500M though it is still quite behind China’s 750M. The M&A and the consolidation process became active in Asia with several of the big regional operators looking to flex muscles in the international markets. After several delays, China started deploying 3G while India again fumbled and postponed its 3G auction. US mobile data market continued its pace in 2009 with each of the four quarters exceeding $10B in data service revenues. The gap between the top two operators and the rest grew to be the biggest in the decade and the industry weathered the recession with ease. There was a clear shift towards prepaid especially for Sprint, T-Mobile, and the tier 2/3 operators. 2009 was also defined by significant activity on the application front. With Facebook eclipsing 100M subscribers and Appstore exceeding 2.5B downloads, sky is the limit. The year also saw an unprecedented growth in mobile data consumption. As we had predicted, for some of the networks, the growth proved to be a double-edged sword. Many in the industry are banking on LTE to help relieve the pain but will be surprised that depending solely on the upgrade strategy will not be enough. Declaring spectrum as a looming crisis, FCC also started tinkering with the mobile industry and the broadband plan. Japan exceeded 90% in 3G penetration while US subscriptions ventured into the 90% territory. Most of western Europe is way past 130%. All in all, a terrific year considering that we went through one of the worst recessions in a generation. As we bid goodbye to the last decade, Nexus One and iTablet only serve to whet our appetite of what’s to come. On a personal note, we started our consulting practice this last decade as we were coming out of the bubble recession and have been fortunate to work with some of the brightest brains and companies in the global ecosystem. We also had a chance to work on some key initiatives that impacted the ecosystem in profound ways. Many thanks to our clients, colleagues, friends, and readers. We will be involved with many new initiatives over the next decade and are looking forward to the conversations through the research notes, books, speeches, panels, whitepapers, blog posts, facebook and twitter feeds, and more. Thanks and Happy New Year. May the upcoming decade leave you happier, healthier, and more successful than the previous one. As we eluded to earlier, 2010 will be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?

© Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 6 http://www.chetansharma.com Mobile Industry Predictions 2010 We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=150) from leading mobile companies across the value chain and around the world opined to help us see what 2010 might bring. 11 names were randomly drawn for 3 special prizes. The winners are: 1.Claire Boonstra, Cofounder, Layar- INQMobile 3G Chat device 2.Michael Libes, CTO, GroundTruth - Open Mobile Book 3.Henri Moissinac, Head of Mobile, Facebook - Open Mobile Book 4.Subba Rao, CEO, TataDoCoMo - Open Mobile Book 5.Saumil Gandhi, Product Manager, Microsoft - Open Mobile Book 6.Sarah Reedy, Senior Editor, Connected Planet - Open Mobile Book 7.Mike Vanderwoude, VP & GM, Cincinnati Bell Wireless - 2010 Mobile Almanac 8.Pinney Colton, VP, GfK - 2010 Mobile Almanac 9.Tim Chang, Principal, Norwest Ventures - 2010 Mobile Almanac 10.Laura Marriott, President, LM Ventures - 2010 Mobile Almanac 11.Asha Vellaikal, Director, Orange - 2010 Mobile Almanac Thanks to INQMobile and Ajit Jaokar for contributing the prize gifts. Despite conventional wisdom, what will not happen in 2010? There were many. Sampling - Verizon iPhone, Microsoft Phone, Sprint will not be bought, Femtocells won’t gain traction, RCS will not happen, Google will not enter handset market directly, iPhone won’t lose steam, Android won’t bring coherence, NFC won’t take off, WiMAX won’t disappear, Nokia won’t bounce back, Palm won’t die, “Year of Mobile” noise won’t subside, carriers won’t be delegated as dumb-pipes. It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem - monetization of social networks, augmented reality, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, Mobile 3.0, LTE, single purpose devices, 3G in India, Bada, app vs web, developer turmoil, featurephones, smart grids, M2M, Chrome, etc. However, be rest assured, we will be tracking these and much more throughout the year and sharing them through various channels. Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly living in "interesting times" with never a dull moment in our dynamic industry. It has been a terrific year for us here at Chetan Sharma Consulting and we are looking forward to the next decade and seeing many of you along the way. We hope you enjoyed gaining from the collective wisdom. Your feedback is always welcome. Be well, Do Cool Work, Stay in touch. Thanks.With warm wishes, Chetan Sharma Disclaimer: Some of the companies mentioned in this note are our clients.clients

© Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 33 http://www.chetansharma.com March 10th chetansharma.com twitter.com/chetansharma chetansharma.com/blog facebook: chetansharma www.mobilebreakfastseries.com

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2010 Mobile Industry Predictions Survey. © Chetan Sharma Consulting, All Rights Reserved Copying w/o permission is prohibited Jan 2010 2

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